Japan PM Abe defends BOJ's policy despite inflation woes


By Leika Kihara and Stanley White

TOKYO, Feb 6 (Reuters) - Japanese Prime Minister Shinzo Abe praised the Bank of Japan's ultra-loose monetary policy for helping create jobs, suggesting the government wasn't unduly worried that inflation remains distant from the central bank's 2 percent target.

Abe told parliament on Wednesday the government "accepts" the explantion given by the BOJ on why inflation has failed to hit its target, stressing the economy would have been in much worse state without the central bank's stimulus programme.

Abe hand-picked BOJ Governor Haruhiko Kuroda in 2013 to deploy a heavy asset-buying programme aimed at eradicating deflation and accelerating inflation to its 2 percent target.

The economy staged a recovery but inflation remains nowhere near the BOJ's goal despite six years of money printing, putting the premier's "Abenomics" stimulus policies under fire.

The BOJ has blamed falling oil prices and the Japanese public's sticky deflationary mindset for delaying achievement of its price target.

Kuroda defended his policy, saying that Japan was not alone among advanced economies to see inflation hurt by factors beyond the central banks' control such as sliding oil prices.

"Expanding base money alone won't immediately have an effect on the economy," Kuroda told the same parliament committee.

"With huge expansion of base money, central banks can push down real interest rates and bank lending rates, which in turn would stimulate the economy," he said. "This is what happened in the past six years."

The BOJ kept monetary policy steady last month but cut its inflation forecasts and warned of growing risks to the economy from trade protectionism and soft global demand.

Annual core consumer inflation slowed to a seven-month low of 0.7 percent in December, data showed last month, a further sign of the growing challenge faced by the BOJ.

This article appears in: Stocks , World Markets , Economy , 401k , Retirement , Bonds

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